National cryptocurrencies: latest trends and expert reasoning

16 May 2018

It took a long time for cryptocurrencies to become a common trend in the financial technology industry since the first introduction of the Bitcoin concept by Satoshi Nakamoto. Current market is a galaxy of constantly lighting new stars, which makes governments across the globe to feel concerned and take a close look at the digital currencies.

Government attitudes

Many governmental bodies worldwide prefer to keep to a wait-and-see attitude as they want to observe the dynamics and further development of the new financial instrument, and later assess the ultimate significance of cryptocurrencies, before taking a final decision on what they will do about that. However, there is a major group of governments retracting from this approach and proactively participating in the market, offering regulation and going as far as to establish their own national-level cryptocurrencies.

According to the opinion of specialists in the area, the year 2018 is expected to be a dramatic period to see emergence of more national-oriented projects implemented across the nations worldwide for the development and mass adoption of local government-advocated digital currencies.

Venezuela

Venezuela became the first country in the world to introduce and adopt a national cryptocurrency called “Petro” in February 2018. The official presale started with initial availability of 82.4 million tokens and the ultimate total volume should be 100 million Petros valued at more than $6 billion.

During the first day of the token presale, Petro successfully attracted over $735 million, according to the report made by the President Nicolás Maduro. The move was accepted by many observers as a way to bypass the U.S. sanctions and get access to additional financing from the international community.

Petro is allegedly an oil backed cryptocurrency and should be used for transactions in tourism, sales of gasoline and oil. As for the President’s opposition, it took a skeptical attitude, saying that the launch of the token sale is an illegal debt issuance.

Some experts believe that Petro should be conceptually treated as tokenized oil, not a cryptocurrency, because it is more similar to a commodity ETF, rather than to a digital decentralized currency at its root.

The skepticism is fueled by the fact that the Venezuelan cryptocurrency has no technological basis for its development and use, unlike all generally circulated cryptocurrencies, which are based on a specific blockchain each. While, there were speculations that Petro will be based on ERC20 standard or on the NEM blockchain, no reports have ever surfaced in the media talking about $735 million worth of Petro token sales. It makes some people suspect that Petro is another ICO scam on a government scale.

Meanwhile, Maduro announced earlier in May the launch of a digital cryptocurrency bank for young people and students, saying that the bank will start operating with 20 million Petros.

Turkey

In February 2018, politicians in Turkey were cited by Al-Monitor as saying that they seek to adopt their own national cryptocurrency. Ahmet Kenan Tanrikulu, the deputy chair of Turkey’s Nationalist Movement Party and the country’s former Industry Minister, put forth a draft report proposing a state-supported cryptocurrency titled as ‘Turkcoin’.

Tanrikulu said: “We […] can create a digital currency, based on companies in the Wealth Fund. Since the demand exists, we should create and release our own digital currency. Opposing those currencies is meaningless. This is a national issue which requires a national consensus”.

Thus, in contrast with the Venezuelan cryptocurrency project, Turkish digital currency’s value will be linked to the national Wealth Fund. Given the fact that the Fund’s assets include resources held in the country’s largest publicly-traded companies such as Turkish Airlines and Turk Telecom, the value of Turkcoin is expected to be high due to the growing value of the Wealth Fund’s assets. Hence, the new cryptocurrency will be more like a security backed by assets.

Hell is paved with good intentions

The trend is rapidly caught by other governments, including Russia, which announced the launch of its CryptoRuble in the middle of the next year. To the best of our knowledge, the cryptocurrency will be tied to ruble and opposite to usual decentralized nature of all existing cryptocurrencies it will be strictly controlled and managed by the Russian authorities.

Ratiocination skills help thinking people understand that the term ‘national cryptocurrency’ is antilogous as a matter of fact, as the idea of cryptocurrency strongly rests on the decentralization and distributed ledger concepts. National cryptocurrencies fail to meet those fundamental criteria.

Artem Duvanov, a Director of Moscow Exchange Group’s National Settlement Depository, suggests his reasoning and vision of the situation: “Cryptocurrencies combine convenience and freedom of cash with the potential of total control of all operations… If the government wants to introduce some control on operations done via crypto on its territory, it does make a lot of sense to issue its own cryptocurrency.”